09/25/2010

Delaying the Inevitable: Cuccinelli's Meritless Lawsuit Will Die Another Day

Judge Henry Hudson handed down a procedural ruling yesterday in Virginia Attorney General Ken Cuccinelli’s challenge to the Affordable Care Act that will allow the suit to move forward to a full hearing. This decision does little more than determine that this baseless lawsuit will be resolved in the coming months—rather than four years from now.

Yet there is a lot not to like about Judge Henry Hudson’s procedural opinion. The Supreme Court held in Massachusetts v. EPA that the Constitution “prohibits” states from suing the federal government “to protect her citizens from the operation of federal statutes”—and Virginia’s lawsuit clearly tries to “protect” its citizens from the operation of a federal law. That should have been the end of this lawsuit, and Judge Hudson was clearly erroneous in allowing it to proceed.

The opinion instead holds that a state can get around the Supreme Court’s clear command simply by passing a “nullification” statute that purports to invalidate a federal law. Nullification—the unconstitutional theory that a state can invalidate federal law—had its day in the pre-Civil War era and Jim Crow South, and it has no place in the 21st century.

Yesterday’s decision ultimately just delays the inevitable. It remains to be seen whether Judge Hudson will uphold health reform himself, or whether he will be reversed on appeal. But it is absolutely clear that the health care reform law survives constitutional scrutiny.

Congress has sweeping power to regulate the national economy

A provision of the Constitution known as the “commerce clause” gives Congress power to “regulate commerce . . . among the several states.” Even ultraconservative Justice Antonin Scalia acknowledges that this provision gives Congress broad authority over “economic activity,” and there is a long line of cases holding that Congress has broad power to enact laws that substantially affect prices, marketplaces, commercial transactions, and other economic activity. The ACA does all of these things.

Cuccinelli claims that one provision of the ACA—the “minimum coverage provision,” which requires all Americans to carry health insurance—is unconstitutional because it is unprecedented. Congress, in his view, has never passed a law that regulates “an individual’s decision not to engage in economic activity.”

Even if such a provision were “unprecedented,” it’s not clear how this fact is relevant. Before Social Security, the federal government had never attempted to provide all Americans with guaranteed pensions. Before Medicare, there was no federal program guaranteeing health care to most seniors. Before the first stoplight, no government had ever attempted to regulate automobile traffic with an electronic device. Simply put, the United States Constitution does not exist to stifle innovation.

It is also simply not true that it is unprecedented for a law to require an individual to engage in economic activity. Segregationists in the Jim Crow South explicitly demanded the right to not engage in commerce. Lunch counter operators wanted to not do business with black patrons. Employers wanted the right to not hire black workers. Realtors demanded the right to not sell certain homes to African Americans. If Cuccinelli’s arguments prevail, it’s unclear how the federal ban on whites-only lunch counters survives the purge.

The Supreme Court thankfully embraced laws such as Social Security and the federal ban on race discrimination shortly after they were enacted. The Constitution clearly requires them to do the same for the ACA if Cuccinelli’s case comes before them.

The minimum coverage provision is the keystone that holds the ACA together

The Constitution also gives Congress the power “[t]o make all laws which shall be necessary and proper for carrying into execution” its power to regulate interstate commerce. As Justice Scalia explains, this means that “where Congress has the authority to enact a regulation of interstate commerce, it possesses every power needed to make that regulation effective.”

The minimum coverage provision is constitutional under this Scalia test, even if it were not valid as part of Congress’s power to regulate commerce. This is because the minimum coverage provision is essential to ensuring that the entire ACA works effectively.

No one, including Cuccinelli, questions that Congress has the power to prohibit insurers from denying coverage to persons with preexisting conditions, but such a law cannot work without a minimum coverage provision. Indeed, seven states enacted a preexisting conditions law without also enacting a minimum coverage provision, and all seven states saw their health insurance premiums spiral out of control.

This happened because of a phenomenon known as “adverse selection.” Adverse selection occurs when consumers delay purchasing health insurance until they become ill or injured—thus forcing the insurance plan to pay them substantially more in benefits than they previously paid in premiums. When one consumer engages in such a delay, everyone else’s premiums must rise to cover that consumer’s costs. When many consumers engage in this delay, the results can shut down an entire insurance market.

There is a way out of this trap. Massachusetts enacted a minimum coverage provision in 2006 to go along with its preexisting conditions provision. The results were both striking and immediate. Nationwide individual premiums increased an average of 14 percent over the next few years, but Massachusetts’s premiums dropped by 40 percent.

In other words, the only way to make the unquestionably constitutional preexisting conditions law effective is to also enact a minimum coverage provision. The minimum coverage provision easily passes the Scalia test.

Congress has broad leeway in how it raises money

Congress also has the authority to “lay and collect taxes” under the Constitution, and this power to tax includes upholding the minimum coverage provision. The provision works by raising an additional income tax off of most individuals who do not carry health insurance—taxpayers who refuse insurance must pay more in taxes, while those who do carry insurance are exempt from this new tax.

Cuccinelli, for his part, argues that the minimum coverage provision does not fall within Congress’s taxing power because “the law is that Congress . . . can’t regulate through taxation that which it cannot otherwise regulate.” But Cuccinelli is living in the past. His support for this proposition is a repulsive 1922 decision, which held that Congress is not allowed to tax businesses in order to discourage them from hiring child labor.

This decision was a relic of an era where basic labor protections such restrictions on child labor were considered unconstitutional. That morally bankrupt era died with the New Deal, and there are a long line of precedents warning that it should never, ever come back.

Conclusion

Cuccinelli’s lawsuit is wholly without merit and will be rejected by the courts. Yesterday’s decision sadly allows him continue to waste taxpayer dollars on this frivolous lawsuit, but the ultimate outcome is not in question. The only question is how much time and money Cuccinelli will waste before he is finally tossed out of court.

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